Financial Results for the Fiscal Year Ended March 31, 2009 (FY08) April 28, 2009 1
Businesses and Major Products Displacement and measurement sensing Temperature control Proximity/ photoelectric/ vision sensors, Machine control PLCs, temperature controllers, Vision sensing machine safeguarding equipment, inspection systems Relays, switches, connectors, LCD backlights, amusement equipment parts, mobile equipment parts, optical communication devices Human sensing Traffic sensing IC card technology Flow sensing Sound sensing Optical control ECB Electronic Components Business SSB Social Systems Business Automated ticket gates and ticket vending machines, road management systems, security management systems, face recognition systems IAB Industrial Automation Business Sensing & Control Intervehicular distance sensing Radio wave sensing AEC Automotive Electronic Components Business HCB Health & Medical Care Business Keyless entry systems, power window switches, automotive relays, laser radar, TPMS, EPS (electronic power steering) devices Bioinformation sensing Behavior sensing Home and professionaluse digital blood pressure monitors, body composition analyzers, thermometers, pedometers, nebulizers, cardiovascular screening monitors, vital sign monitors Consolidated subsidiaries Affiliates accounted for by the equity method 162 18 (as of Mar. 31, 2009) 2
Contents Executive Summary P. 4 Results for the Fiscal Year Ended March 31, 2009 (FY08) P. 5 FY09 Forecast P. 21 Emergency Measures and Structural Reform P. 29 Businesses and Technology Driving Future Growth P. 43 Reference P. 47 Notes 1. The consolidated statements of Omron Corporation (the Company) are prepared in accordance with U.S. GAAP. 2. Projected results and future developments are based on information available to the Company at the current time, as well as certain assumptions judged by the Company to be reasonable. Various factors could cause actual results to differ materially from these projections. Major factors influencing Omron's actual results include, but are not limited to, (i) economic conditions affecting the Company's businesses in Japan and overseas, (ii) demand trends for the Company's products and services, (iii) the ability of the Company to develop new technologies and products, (iv) major changes in the fundraising environment, (v) tieups or cooperative relationships with other companies, and (vi) movements in currency exchange rates and stock markets. 3
Executive Summary FY08 Results Sharp YoY drop in sales and operating income due to global economic downturn. In particular, IAB, ECB and AEC saw dramatic sales plunge beginning in Q3 as production cuts and suspension/ delay of capital investment by manufacturers (incl. automotive, semiconductor and electronic component industries) became more apparent. Emergency measures and structural reform introduced in Feb. 2009 following worsening of business environment. As a part of the structural reform plan aimed at strengthening profit base, Omron accounted for the impairment of goodwill and fixed assets. Consolidated Actual YoY vs. Jan 29 fcst Margin (%) Net sales 627.2 bn 82.2% 98.8% Operating income 5.3 bn 8.2% 76.3% 0.9% NIBT 39.1 bn Net income 29.2 bn FY09 Forecast Omron expects drop in sales and profit, following further worsening of economy. Aims to generate profit by carrying out emergency (crisis response) measures to secure operating profit and restructure 3 control businesses as part of mediumterm structural reform plan to strengthen profit base. Consolidated FY 09 Forecast YoY Margin (%) Net sales 510.0 bn 81.3% Operating income 0.0 bn 0.0% 0.0% NIBT 3.5 bn Net income 2.0 bn *Assumed exchange rates for FY09: 1USD = 95; 1EUR = 125 4
Results for the Fiscal Year Ended March 31, 2009 (FY08) Executive Summary P. 4 Results for the Fiscal Year Ended March 31, 2009 (FY08) P. 5 FY09 Forecast P. 21 Emergency Measures and Structural Reform P. 29 Businesses and Technology Driving Future Growth P. 43 Reference P. 47 5
Consolidated P/L Sales: 627.2 bn; operating income: 5.3 bn (margin: 0.9%), far below FY07. In addition, loss in NIBT and net income due to increase in nonoperating loss. (Billions of yen) P/L FY08 Actual (1) FY07 Actual (2) FY08/FY07 (1)/(2) vs. Jan 29 fcst Net sales 627.2 763.0 82.2% 98.8% Gross profit 218.5 293.3 74.5% 99.3% SG&A 164.3 176.6 93.0% 100.2% R&D 48.9 51.5 94.9% 99.8% Operating income 5.3 65.3 8.2% 76.3% Nonoperating loss, net 44.4 1.1 ー ー NIBT 39.1 64.2 ー ー NIAT 29.2 42.4 ー ー <Exchange Rates> (1JPY) USD 100.7 114.1 13.4 +1.2 EUR 144.5 161.9 17.4 +1.9 6
Nonoperating Loss Breakdown Omron accounted for the impairment of goodwill and fixed assets in order to accelerate business structure reform while at the same time working to ensure sound management and fair valuation of assets. Breakdown Impairment of goodwill Impairment of fixed assets Additional impairment of investment securities Others Total Nonoperating loss, net (billions of yen) 16.8 21.2 5.4 1.0 44.4 7
Consolidated Sales by Area/Segment Large YoY drop both in Japan and overseas due to global economic recession. IAB, ECB and AEC were hit hardest. (Billions of yen) Area Japan Overseas* FY08 Actual (1) 315.6 311.6 FY07 Actual (2) 365.9 397.1 FY08/FY07 (1)/(2) 86.3% 78.5% vs. Jan 29 fcst 98.6% 98.9% Total 627.2 763.0 82.2% 98.8% * Includes direct exports Business IAB ECB AEC SSB HCB Others FY08 Actual (1) 262.9 124.0 82.1 79.9 63.8 14.5 FY07 Actual (2) 328.8 154.2 107.5 85.2 71.6 15.7 FY08/FY07 (1)/(2) 80.0% 80.4% 76.4% 93.7% 89.1% 93.0% vs. Jan 29 fcst 98.1% 99.5% 97.2% 99.5% 101.3% 98.9% Total 627.2 763.0 82.2% 98.8% 8
Sales Breakdown by Area Europe & US: Down approx. 1% pt due to sluggish sales. Greater China: Maintaining 12.0% in spite of decrease in sales. Greater China 91.5 bn 12.0% AsiaPacific 46.9 bn 6.1% 3.0% Exports 22.8 bn Greater China 75.2 bn 2.1% 6.4% 12.0% AsiaPacific 40.4 bn Exports 12.5 bn 13.3% 48.0% 12.8% 50.3% Americas 101.5 bn 17.6% Americas 80.4 bn 16.4% Europe 134.5 bn Japan 365.9 bn Europe 103.1 bn Japan 315.6 bn 763.0 billion yen (March 2008) 627.2 billion yen (March 2009) 9
Sales Breakdown by Business Segment IAB share decreased from 43.1% to 41.9%. IAB ECB AEC 627.2 billion yen (March 2009) 41.9% 19.8% Others 2.3% 10.2% 13.1% 12.7% HCB SSB 10
Consolidated Operating Income by Segment All segments saw sharp YoY decline due to sluggish sales and exchange loss. ECB and AEC posted operating loss. (Billions of yen) Business FY08 Actual (1) FY07 Actual (2) FY08/FY07 (1)/(2) vs. Jan 29 fcst IAB 20.5 51.9 39.4% 99.3% ECB 2.0 12.6 AEC 6.4 1.4 SSB 5.4 7.0 76.0% 111.5% HCB 4.8 9.4 51.5% 110.0% Others 0 0.1 50.6% HQ Cost/ Elimination 17.0 17.1 Total 5.3 65.3 8.2% 76.3% 11
Consolidated Operating Income Analysis (YearonYear) Down sharply YoY due to net sales drop and exchange loss. Sales down, product mix (Billions of yen) 65.3 59.2 Exchange loss SG&A, R&D: M&A 0.6 +6.6 5.3 FY2007 Actual 17.1 Material costs down +1.1 M&A gain +0.4 +8.8 SG&A, R&D: Exchange gain SG&A, R&D down FY2008 Actual Gross profit down 74.8 bn Operating income down 60.0 bn (Exchange loss: 8.3 bn) 12
Consolidated Operating Income Analysis (vs. Jan 29 fcst) Although exchange rates turned in favor of the yen, operating income fell short of the previous forecast overall. Sales down, product mix SG&A, R&D: Exchange loss (Billions of yen) 7.0 4.1 Exchange gain +1.6 Fixed costs Material down costs down +0.5 +0.5 1.1 Fixed costs down +0.8 R&D down +0.1 Gross profit down 1.5 bn 5.3 Operating income down 1.7 bn (Exchange gain: +0.5 bn) vs. Jan 29 fcst FY2008 Actual 13
IAB (Industrial Automation Business) Hit by further slash in capital investment among manufacturers following global recession. Even Asia Pacific and Greater China, once steady, saw sudden plunge starting in Q3. (Billions of yen) IAB Japan Overseas North America Europe Asia Pacific Greater China Exports Total FY08 Actual (1) 116.4 146.5 31.7 70.7 17.4 25.7 1.0 262.9 FY07 Actual (2) 144.1 184.7 35.6 92.3 16.2 34.6 6.0 328.8 FY08/FY07 (1)/(2) 80.8% 79.3% 89.3% 76.5% 106.9% 74.5% 16.3% 80.0% vs. Jan 29 fcst 98.3% 98.0% ーーーーー 98.1% Operating income 20.5 51.9 39.4% 99.3% OP margin 7.8% 15.8% 8.0% +0.1% Sales by Area Asia 7% China 10% Exports 0% Europe 27% North America 12% Japan 44% Programmable controllers Safety components Vision sensors 14
ECB (Electronic Components Business) 1 st half: Smallsize LCD backlights and switches for mobile devices recorded strong sales. 2 nd half: Sluggish overall. In addition to continued shrinking sales in semiconductor and auto markets, ECB got hit by downturn in consumer and commercial equipment markets. (Billions of yen) ECB Japan Overseas North America Europe Asia Pacific Greater China Exports Total FY08 Actual (1) 56.0 68.0 8.6 9.2 8.4 37.8 3.9 124.0 FY07 Actual (2) 62.4 91.8 10.4 12.4 10.3 48.3 10.4 154.2 FY08/FY07 (1)/(2) 89.7% 74.0% 82.2% 74.5% 81.7% 78.3% 37.7% 80.4% vs. Jan 29 fcst 99.1% 99.9% ーーーーー 99.5% Operating income 2.0 12.6 OP margin 8.2% Sales by Area China 31% Exports 3% Japan 45% MEMS microphones Asia 7% Europe 7% North America 7% Compact LCD backlights FPC connectors 15
AEC (Automotive Electronic Components Business) 1 st half: Hit hard by soaring gasoline prices and slowing economy. 2 nd half: Hit further. Effects of financial crisis became apparent, elevating credit crunch and job uncertainty on a global level. As a result, auto market deteriorated further, with consumers holding back on spending. AEC Japan Overseas North America Europe Asia Pacific Greater China Exports Total FY08 Actual (1) 25.0 57.1 27.9 9.0 12.5 4.7 3.0 82.1 FY07 Actual (2) 28.0 79.5 42.4 13.9 18.3 3.1 1.9 107.5 FY08/FY07 (1)/(2) 89.3% 71.8% 65.8% 64.7% 68.4% 153.6% 160.8% 76.4% (Billions of yen) vs. Jan 29 fcst 96.2% 97.6% ーーーーー 97.2% Operating income OP margin Sales by Area Asia 15% China 6% Exports 4% Japan 30% 6.4 1.4 1.3% Electric power steering (EPS) controllers Europe 11% North America 34% Passive entry systems 16
SSB (Social Systems Business) 1 st half: Enjoyed increased demand for train station equipment with opening of new lines. 2 nd half: Struggled as sudden economic downturn led railroad operators to cut investment. (Billions of yen) SSB Japan Overseas North America Europe Asia Pacific Greater China Exports Total FY08 Actual (1) 75.5 4.4 0.2 0 0 0.1 4.1 79.9 FY07 Actual (2) 81.0 4.2 0.6 0 0 0 3.6 85.2 FY08/FY07 (1)/(2) 93.2% 105.0% 38.3% ーーー 114.9% 93.7% vs. Jan 29 fcst 98.7% 115.7% ーーーーー 99.5% Operating income 5.4 7.0 76.0% 111.5% OP margin 6.7% 8.3% 1.6% +0.6% Sales by Area Exports 5% Transport management systems Japan 94% AFC (automatic fare collection) systems Security systems 17
HCB (Health and Medical Care Business) Japan: Sales sluggish both in healthcare and medical equipmentrelated markets. Overseas: First half saw rise in sales to major N. American retailers and growth in blood pressure monitor business in emerging markets. Second half turned challenging with economic recession and effects of strong yen. HCB Japan Overseas North America Europe Asia Pacific Greater China Exports Total FY08 Actual (1) 28.3 35.5 12.0 14.3 2.1 6.7 0.4 63.8 FY07 Actual (2) 35.0 36.6 12.5 15.9 2.1 5.5 0.7 71.6 FY08/FY07 (1)/(2) 81.0% 96.9% 96.3% 89.8% 100.4% 122.5% 59.4% 89.1% (Billions of yen) vs. Jan 29 fcst 101.2% 101.3% ーーーーー 101.3% Operating income 4.8 9.4 51.5% 110.0% OP margin 7.6% 13.1% 5.5% +0.6% Sales by Area China Asia 11% 3% Exports 1% Japan 44% Body composition monitors Europe 22% North America 19% Digital blood pressure monitors Noninvasive vascular screening devices 18
Consolidated B/S Accounts receivable and inventories were down due to sales drop and exchange loss. Equity ratio down to 55.4% due partly to valuation loss on foreign assets converted to yen and losses in fixed assets and equity. Consolidated B/S Total Assets Cash and cash equivalents Notes and accounts receivable, trade Inventories Other current assets Property, plant and equipment Investments and other assets Total Liabilities Shortterm debt Longterm debt Other liabilities Minority Interest Shareholders' Equity Common stock and retained earnings Accumulated other comprehensive loss Treasury stock Liabilities, Minority Interest & Shareholders' Equity Total Mar. 2009 538.3 46.6 111.0 84.7 33.7 132.5 129.8 238.3 33.5 21.4 183.4 1.6 298.4 403.6 60.7 44.5 538.3 (Billions of yen) Mar. 2008 617.4 40.6 164.7 95.1 29.6 152.7 134.7 246.9 18.3 1.5 227.1 2.0 368.5 438.2 28.2 41.5 617.4 19
Consolidated Cash Flows Decrease in free cash flow was covered partly by debts. Yearend cash and cash equivalents ended up at FY07 level. (Billions of yen) Consolidated C/F Operating activities Investing activities Free cash flow Financing activities Effect of exchange rate changes Net increase/decrease Cash and cash equivalents at end of period Mar. 2009 31.4 40.6 9.2 21.9 6.6 6.0 46.6 Mar. 2008 69.0 36.7 32.3 34.5 0.2 2.4 40.6 Depreciation and amortization Capital expenditures* 33.5 36.8 36.3 37.1 * The figures for capital expenditures given here differ from the figures given on the Statement of Cash Flows. 20
FY09 Forecast Executive Summary P. 4 Results for the Fiscal Year Ended March 31, 2009 (FY08) P. 5 FY09 Forecast P. 21 Emergency Measures and Structural Reform P. 29 Businesses and Technology Driving Future Growth P. 43 Reference P. 47 21
Economic Indicators Industrial Production Index and Machinery Orders kept decreasing. Shipment of electronic components also went down on a global basis (upward trend for the past few months except in the Americas). 160 140 Industrial Production (a) and Machinery Orders (b) 120 100 80 Shipment of Electronic Components (Year on Year) 60 40 20 (a) (b) 140.0 120.0 0 00/04 00/09 01/02 01/07 01/12 02/05 02/10 03/03 03/08 04/01 04/06 04/11 05/04 05/09 06/02 06/07 06/12 07/5 07/10 08/3 08/08 09/01 100.0 80.0 60.0 Total (global) Japan Americas *Source: (a) Ministry of Economy, Trade and Industry (b) Economic and Social Research Institute Cabinet Office 40.0 20.0 0.0 07/01 02 03 04 05 Europe China Asia/Others 06 07 08 09 10 11 12 08/01 02 03 04 05 06 07 08 09 10 11 12 09/01 02 Source: Japan Electronics and Information Technology Industries Association 22
Basis for FY09 Forecast External Environment Further worsening of business environment is likely in FY09, but gradual recovery is projected in the second half. Increasingly severe operating environment expected as a result of the global recession. Semiconductor, electronic component and automotive industries will likely be most challenging. JPY USD/EUR exchange rate unstable (see p. 48) Continued stabilization of raw material costs (silver and copper) (see p. 49) Basis for Forecast Forex: 1USD = 95; 1EUR = 125 Raw material costs: Silver: 40,000/kg; Copper: 480/kg Emergency Measures & Structural Reform Emergency measures aimed at P/L improvement (by Mar. 2010) Reduce fixed/ variable costs (approx. 60 bn) Create cash flow (approx. 27 bn) Structural reform comprising business domain reform" and "operational structure reform" (by Mar. 2011) Reorganization of 3 control businesses (1) Elimination and consolidation of production bases, (2) variable cost structure reform (3) IT structure reform (4) head office function reform 23
FY09 Forecast by Segment IAB Industry Continued sluggish demand and curtailment of capital investment in related industries incl. automotive, electronic components and machine tool industries. Area Continued severe conditions in Japan, North America, Europe, Asia and China. Strengthening operations in Russia, Brazil, South Africa, etc. ECB Industry Production of machine tools, semiconductors and industrial machinery expected to decrease further. Area Severe conditions in Japan due to continued weak consumer spending. Promising environmental business to be expanded in US and Europe. AEC Industry Continued sluggish demand in worldwide automotive industry. Focusing on green vehicles such as hybrids and electric cars. Area Continued sluggish demand in North America. Continued weak sales of new cars in Japan. SSB Industry Curtailed investment due to stagnant economy, particularly in railway and financial industries. Strengthening appeal of social sensors, aiming for longterm growth. HCB Industry Continued weak consumer spending and curtailed investment at hospitals, but health consciousness (of lifestylerelated disease prevention, etc.) will remain high. Area Continued severe conditions in developed countries (Japan, European countries, etc.). Strengthening sales in emerging countries. 24
Projected Results for FY09 Economic downturn continues, earnings environment still severe. Secure OP through implementation of emergency measures. (Billions of yen) FY09 Plan FY08 Actual YoY Net sales 510.0 627.2 81.3% Gross profit 175.0 218.5 80.1% SG&A 135.0 164.3 82.1% R&D 40.0 48.9 81.8% Operating income 0 5.3 Nonoperating loss, net 3.5 44.4 NIBT 3.5 39.1 NIAT 2.0 29.2 EPS (yen) 9.08 132.15 25
Projected Sales (Consolidated) by Area/Segment Severe conditions continue in each area/segment due to global decline in capex and continuing employment instability. Gradual recovery expected starting in the second half. Area Japan Overseas* FY09 Plan 268.5 241.5 FY08 Actual 315.6 311.6 (Billions of yen) YoY 85.1% 77.5% Total 510.0 627.2 81.3% * Includes direct exports Business IAB ECB AEC SSB HCB Others FY09 Plan 193.0 112.0 60.0 66.0 61.5 17.5 FY08 Actual 262.9 124.0 82.1 79.9 63.8 14.5 Yr/Yr 73.4% 90.4% 73.1% 82.6% 96.4% 120.4% Total 510.0 627.2 81.3% 26
Projected Operating Profit by Segment Projecting lower OP in each segment due to lower sales. Remain in the black through implementation of emergency measures. (Billions of yen) Business FY09 Plan FY08 Actual YoY IAB 5.0 20.5 24.4% ECB 3.0 2.0 AEC 0 6.4 SSB 4.0 5.4 74.7% HCB 4.0 4.8 82.6% Others 1.0 0 HQ Cost/ Elimination 15.0 17.0 Total 0 5.3 27
Capex, Depreciation and R&D Expenses Capex: Drastic reduction through implementation of emergency measures/ structural reform. Depreciation: Dramatic cut by investment restriction and fixed assets impairment. R&D expense: Drastic reduction through implementation of emergency measures. Focus on strengthening existing businesses. R&D at IAB: Lowcost PLCs for smallsized systems. Solar power conditioners in environmentrelated business. (Developing antiislanding control technology for solar power generation system.) R&D at ECB: EMC (Electronic Mechanical Components) product development. Development of microreplication processing, nanomaterial technology and MEMS (Micro Electro Mechanical Systems) technology. FY09 Plan FY08 Actual (Billions of yen) YoY Capital expenditures 25.0 36.8 67.9% Depreciation & Amortization R&D 27.0 40.0 33.5 48.9 80.6% 81.8% * The figures for capital expenditures given here differ from the figures given on the Statement of Cash Flows. 28
Emergency Measures and Structural Reform Executive Summary P. 4 Results for the Fiscal Year Ended March 31, 2009 (FY08) P. 5 FY09 Forecast P. 21 Emergency Measures and Structural Reform P. 29 Businesses and Technology Driving Future Growth P. 43 Reference P. 47 29
Emergency Measures & Structural Reform: Outline FY08 Drop in sales and operating profit due to drastic worsening of the business environment. FY09 (Shortterm Measures) Implementation of emergency measures to secure operating profit. Mediumterm Measures Implementation of structural reform to strengthen profit base. 30
Emergency Measures & Structural Reform: Outline Emergency Measures & Structural Reform Emergency Measures (Generate profit in FY09 through cost cuts) Structural Reform (Strengthening of profit base over the medium term) Profit Generation (1) Cost cutting Advertising, R&D, indirect costs, etc. (2) Withdrawal from underperforming businesses Four businesses in Japan/abroad (ECB, AEC) (3) Reduction of other fixed costs Return of part of directors, executive officers and managers' compensation, ban on overtime work, etc. Cash Flow Creation Freeze on largescale investments Reduction in ordinary investments 1. Business Domain Reform Restructure 3 control businesses: IAB, ECB and AEC IAB: Strengthen front line and profit base ECB: Restrengthen EMC business AEC: Implement thorough efforts to improve profitability 2. Operational Structure Reform (1) Elimination and consolidation of production bases (2) Variable cost structure reform (3) IT structure reform (4) Head office function reform 31
Emergency Measures & Structural Reform: Schedule Designate the period from Feb. 2009 Mar. 2011 as Revival Stage, carry out emergency measures and structural reform "Grand Design 2010" (GD2010) Omron's longterm management vision 1 st Stage 2 nd Stage 3 rd Stage Abandon the 3 rd stage and designate 26month period until Mar. 2011 as "Revival Stage;" focus on structural reform Feb. 2009 Emergency Measures New Longterm Management Vision (PostGD2010) Revival Stage (Structural Reform Period) Apr. 2001 Apr. 2004 Apr. 2008 Apr. 2009 Apr. 2010 Mar. 2011 32
Goals of Emergency Measures: Creation of Profit & Cash Flow Jan. 30, 2009 Map out plan to generate profit of approx. 40 bn based on projection that FY08/Q4 conditions would continue into FY09. Today (Apr. 28, 2009) Implement further costcutting measures, as the business environment, which deteriorated more severely than expected in FY08/Q4, is likely to remain unchanged for the time being. FY09 Aim to improve PL by approx. 60 bn by cutting fixed and variable costs, post operating profit. Create approx. 27 bn cash flow by reducing inventories and restraining investments. 33
Emergency Measures (1) Cut Costs, Restrain Investment, Reduce Inventories Aim to improve P/L by approx. 60 bn by cutting not only fixed costs (overhead and labor costs, investments, depreciation by impairment) but also variable costs (better variable costs ratio). Create approx. 27 bn cash flow by reducing inventories and restraining investments. Improving FY09 P/L through profit creation (part of emergency measures ) and other measures Target value (approx.) Reduce fixed costs Reduce variable costs Labor costs, overhead costs Depreciation (restraint on investments) Depreciation (impairment of fixed assets) Raw material costs and others 55 bn 5 bn 60 bn Cash flow creation (items for cash flow improvement in FY09) Reduce inventories Inventories Restrain investments New capital investment 15 bn 12 bn 27 bn 34
Emergency Measures (2) Withdraw Unprofitable Businesses Omron will promptly withdraw unprofitable or lowprofitable businesses to generate profit Closure of four ECB/ AEC businesses in Japan and abroad Dissolution of Largesize Backlight Business (ECB) Omron will dissolve subsidiary TAMA FINE OPT. and its two subsidiaries by the end of September 2009, with liquidation to be completed by the end of fiscal 2009. (Announced on March 10, 2009) * Emergency measures for other businesses are to be decided and announced at a later date. 35
Structural Reform Goals Strengthen Profit Base in the Medium Term 763.0 Aim to establish a business structure that generates more than JPY 100 bn in OP at the FY07 sales level (JPY 750 bn) through sweeping profit structure reform. FY2007 FY2008 FY2009 FY201X (Actual) (Actual) (Planned) (Target) Strengthen profit base over the medium term 627.2 510.0 750.0 65.3 5.3 Mainly through emergency measures +0 Mainly through structural reform 100.0 (Billions of yen) Approx. JPY 60 bn improvement 08 Maintain BEP of approx. JPY 500 bn in sales by restricting/offsetting fixed costs increase and reducing variable cost ratio 36
Structural Reform Goals Improve BEP Increasing operating profit when sales recovers, by lowering BEP to approx. 70% with reduction of fixed costs and variable cost ratio. Cost FY2008 Actual Emergency Measures Sales line FY2009 Planned Structural Reform Future target JPY 100 bn OP at JPY 750 bn sales BEP Profit Total cost line Variable cost reduction Variable cost BEP Loss Fixed cost Fixed cost reduction 70% FY08 Actual JPY 627.2 bn Sales FY09 Plan JPY 510.0 bn Approx. JPY 750.0 bn BEP to be maintained at JPY 500 bn sales, by holding down of fixed cost increase and lowering variable cost ratio 37
Structural Reform (1) Business Domain Reform Restructuring of 3 Control Businesses Omron will restructure its business domains into three categories: Industry, Society and Lifestyle. Looking to the future, Omron will implement business domain reform to standardize the operations of its 3 controlbased businesses and avoid dispersal of resources. From To Control Equipment Electronic Components Automotive Electronic Components Train station/ traffic solutions IAB ECB AEC SSB Restructure 3 control businesses Domain expansion Industry Society Restructure According to Strengths SSB Health/ Medical care HCB Domain expansion Lifestyle HCB Business Development Establishment of Environmental Solutions Business HQ Society (Environment) 38
Structural Reform (1) Business Domain Reform Restructuring of 3 Control Businesses (Not Available Online) 39
Structural Reform (1) Business Domain Reform Restructuring of 3 Control Businesses Each business domain carries out its own tasks to realize mid longterm restructuring. IAB FA FA (Factory Automation) Business Focus on generaluse components in Japan Strengthen domestic frontline staff (approx. 300 additional sales & customer service staff) Strengthen collaborative relationships with domestic channels (2,000 sales staffers) to increase market coverage Enhance production in China to become more price competitive on a global level ECB EMC/ ME EMC (Electro mechanical) Business Strengthen productivity to raise profit (shared application of raw materials, dies, and processing technology) Accelerate closure and consolidation of production sites ME (Micro electronics) Business Seek new applications (with MEMS) aiming at business growth AEC Auto Elec. Comp. Automotive Electronic Components Business Focus on target customers and products and encourage autonomous operation Give focus on target customers and concentrate on ECU*related business Transfer businesses to EMC, relay business among others Operate autonomously as a segment specialized in the auto industry *Electronic Control Unit 40
Structural Reform (2) Closure/Consolidation of Sites Close/consolidate approx. 30% of production sites from FY08 to FY10. Number of Production Sites* Jan. 2009 Mar. 2011 49 30 35 * Production sites: Sites with production function and/or production management function Sites to be closed/consolidated (decided in FY08): Largesized backlight business: TFO (3 sites) Automotive electronic components business: OUK (Omron Automotive Electronics UK Ltd.) Semiconductor business: Minakuchi factory, Japan FA business: OMA (Omron Manufacturing of America, Inc., US) 41
Structural Reform (3) Variable cost structure, IT structure, and head office function reform Variable Cost Structure Reform Aim to improve variable costs ratio by 2.5 pt. Establish intersegment system of supplying commonuse processed components. Global rawmaterial standardization and integration. IT Structure Reform Process innovation in production, sales and R&D. Promote head office restructuring and establish global corporate governance in accounting. Head Office Function Reform Visualize and streamline office staff functions that the head office and each business segment has to optimally allocate the workforce 42
Businesses and Technology Driving Future Growth Executive Summary P. 4 Results for the Fiscal Year Ended March 31, 2009 (FY08) P. 5 FY09 Forecast P. 21 Emergency Measures and Structural Reform P. 29 Businesses and Technology Driving Future Growth P. 43 Reference P. 46 43
Businesses Driving Future Growth: Green Business Aiming to maximize ROC* through precise visualization and effective reduction of CO2 emissions Support for top management decision making Create an optimal portfolio Facilities improvement Operations improvement Emission credits Maximization of ROC * Return on carbon Precise and realtime confirmation of CO2 emissions across all corporate activities Solutions for CO2 reduction Social Requirements Law Concerning the Rational Use of Energy Law Concerning the Promotion of Measures for Controlling Global Warming Carbon footprint system Emissions trading 44
Businesses Driving Future Growth: Products that Meet Environmental Needs Environmental Solutions Business (Environmental Solutions Business HQ) Remote power monitoring systems: Visualization and reduction of CO2 emissions Environmental Components Business (IAB) Solar power conditioners, environmental sensors Environmental Device Business (ECB) DC power relays, capacitors 45
Technology Driving Future Growth: Progress in Sensing Strengthening core technologies of smart sensing module as a basis of future sensor development Sensing Technology MEMS/NEMS Specialized nanothin film Signal Processing IC High accuracy sensor Knowledge IC Control Technology Feature extraction Inference learning Knowledge information control Wireless Communication Technology Ubiquitous network Zigbee, RFID Antenna Integration Technology Si penetration wiring (MEMS/MOS) Waferlevel package MEMS/MOS vertical integration RFIC Buildup multilayer memory ASIC Capacitor Power generation device Energy Technology Small and environmental power generation Mass electricity accumulation Environmental vibration power generation device Ecotechnology that converts Environmental vibration energy into electricity (Announced on November 11, 2008) 46
Reference Executive Summary P. 4 Results for the Fiscal Year Ended March 31, 2009 (FY08) P. 5 FY09 Forecast P. 21 Emergency Measures and Structural Reform P. 29 Businesses and Technology Driving Future Growth P. 43 Reference P. 47 47
Exchange Rates (USD, EUR) Both USD and EUR plunged YoY. 1JPY 170 160 150 140 130 USD EUR FY07 161.9/EUR FY08 144.5/EUR FY09 plan 125.0/EUR 120 110 100 FY07 114.1/USD FY09 plan 95.0/USD 90 FY08 100.7/USD 80 04/04 07/04 10/04 01/05 04/05 07/05 10/05 01/06 04/06 07/06 10/06 01/07 04/07 07/07 10/07 01/08 04/08 07/08 10/08 01/09 04/09 07/09 10/09 01/10 48
Raw Material Prices FY08 silver and copper prices dropped YoY. Silver price quotation, JPY/kg Copper price quotation, JPY/kg 70,000 1500 60,000 Silver Copper FY07 53,153 FY08 46,265 1300 50,000 40,000 30,000 March 2003 Silver: 18,510 Copper: 240 March 2006 Silver: 40,160 Copper: 643 FY07 895 FY09 est: 40,000 1100 900 700 500 20,000 10,000 FY08 657 FY09 est: 480 300 100 0 03/03 09/03 03/04 09/04 03/05 09/05 03/06 09/06 03/07 09/07 03/08 09/08 03/09 09/09 03/10 100 49
Shaping Our Sense of Security with Sensing and Control Technology Contact Omron Corporation IR and M&A Planning HQ, IR Department Phone: +81334367170 Email: omron_ir@omron.co.jp Website (English): www.omron.com 50
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